The Court emphasized the need for restraint in judicial review of commercial contracts, especially in matters involving technical issues, and highlighted the importance of deferring to the discretion of the tender inviting authority.

JUDGMENT :

Dhananjaya Y Chandrachud, CJI.

1. Leave granted.

2. These appeals arise from a judgment dated 27 July 2023 of a Division Bench of the High Court of Karnataka. The High Court set aside a judgment of a Single Judge, in a writ appeal¹[Writ Appeal No 1169 of 2022 (GM-TEN)]. As a consequence of the impugned judgment, a Letter of Intent²[“LoI”] which was issued by Bharat Heavy Electricals Limited³[“BHEL” (the second respondent)], in favour of the appellant has been quashed and BHEL has been directed to consider the bid submitted by the first respondent in terms of a Notice Inviting Tenders dated 24 June 2022.

3. BHEL was awarded a contract for setting up the 5x800 MW Yadadri Thermal Power Station. A part of the work was sought to be subcontracted. BHEL invited bids for undertaking the work of design, engineering, manufacturing, supply and other related works pertaining to an Ash Handling Plant. The appellant submitted its bid. On 29 September 2022, a letter of intent was issued to the appellant for a total contract value of Rs 378.64 crores.

4. The controversy in the present case turns on the pre-qualification requirement for bidders, notified by BHEL. Clause 01.00.00 deals with the technical criteria. Clauses 01.01.01, 01.01.02, and 01.01.03 are material in the present case. Clause 01.01.01 contains certain specific requirements that bidders had to fulfill. It read as follows:

“The bidder should have executed at least one (1) number Ash Handling Plant (AHP) in India/abroad for a thermal power station using sea water/plain water involving design, engineering, manufacture, procurement, supply, erection & commissioning (or supervision of erection & commissioning) comprising the following systems which should be in successful operation for at least (1) year as on date of submission of the bid:

a. Bottom ash handling system comprising jet pump system in conjunction with water impounded bottom ash hopper designed from minimum 50 TPH (on dry ash basis) capacity or more for pulverized coal fired boilers.

AND

b. First stage fly ash handling system for conveying fly ash from ESP hoppers to Intermediate Surge Hopper (ISH) by vacuum conveying system designed for minimum 30 TPH capacity (dry ash basis) per stream.

AND

c. Second stage fly ash handling system for conveying fly ash from Intermediate Surge Hopper (ISH) to Fly ash silos by pressure conveying system designed from minimum 20 TPH capacity (dry ash basis) per line for a distance not less than 500 mtrs.

AND

d. High Concentration Ash Slurry Disposal (HCSD) System for minimum 40 TPH capacity (dry ash basis) per line.

The above Clauses 01.01.01 (a), (b), (c) and (d) can be in one single plant or in a combination of plants.”

5. Clause 01.01.02 stipulated that a bidder who is a supplier of a bulk material handling system, but does not fulfill the requirements under clause 01.01.01 could also participate, subject to certain stipulations. The clause is extracted below:

“Bidder who is a supplier of bulk material handling system but does not meet the requirements under clause 01.01.01 above in part or in full can also participate provided he has executed at least the following systems design, engineering, manufacture, supply, erection & commissioning (or supervision of erection & commissioning):

a. Fly Ash Handling System for conveying Fly Ash from ESPs in dry form (vacuum conveying or pressure conveying system) or in wet slurry mode

OR

b. Bulk material handling system, comprising of bell conveyors having a minimum design capacity of 800 TPH

The systems mentioned at 01.01.02 (a) or (b) above should be in successful operation in at least two (2) plants for at least two (2) years as on date of submission of bid and should have been installed for pulverized coal fired boiler units in India/abroad generating not less than 40 TPH of Ash per boiler.

AND

Collaborate(s)/Associate(s) with party(ies) who meet(s) either the total requirement under 01.01.01 (a), (b) and (c) above or any of the above requirement un